Request for Information Regarding an Initiative on Safe Student Banking, 4255-4258 [2015-01492]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 80, Number 17 (Tuesday, January 27, 2015)]
[Notices]
[Pages 4255-4258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01492]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

[Docket No. CFPB-2015-0001]


Request for Information Regarding an Initiative on Safe Student 
Banking

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Notice and request for information.

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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) 
seeks feedback on a draft Safe Student Account Scorecard that offers 
information to colleges and universities when soliciting agreements 
from financial institutions to market safe and affordable financial 
accounts for their students. The Bureau seeks comment from the public, 
including student and parent consumers, institutions of higher 
education, and financial institutions.

DATES: Comments must be received on or before March 9, 2015.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2015-
0001, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: FederalRegisterComments@cfpb.gov. Include the title 
and Docket No. CFPB-2015-0001 in the subject line of the message.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number for this proposal. Because paper mail in the Washington, 
DC area and at the Bureau is subject to delay, commenters are 
encouraged to submit comments electronically. In general, all comments 
received will be posted without change to https://www.regulations.gov. 
In addition, comments will be available for public inspection and 
copying at 1275 First Street NE., Washington, DC 20002, on official 
business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You 
can make an appointment to inspect the documents by telephoning (202) 
435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: For general inquiries, submission 
process questions or any additional information, please contact Monica 
Jackson, Office of the Executive Secretary, at 202-435-7275.

    Authority: 12 U.S.C. 5511(c).


SUPPLEMENTARY INFORMATION: Pursuant to the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act) that established 
the Bureau, part of the Bureau's mission is to empower consumers to 
take control over their economic lives. The Bureau is specifically 
charged with promoting financial education, researching developments in 
markets for consumer financial services and products, and providing 
information, guidance, and technical assistance regarding the offering 
and provision of consumer financial products or services to 
traditionally underserved consumers and communities.
    Section 1021 of the Dodd-Frank Act charges the Bureau with 
``collecting, researching, monitoring and publishing information'' 
about consumer financial products and services. The Bureau seeks 
feedback on a potential Safe Student Account Scorecard that colleges 
and universities can voluntarily use when negotiating with providers to 
ensure that financial accounts marketed to their students are accounts 
that the college or university deems safe and affordable.
    The Bureau is interested in receiving comments to develop a Safe 
Student Account Scorecard. The Bureau is therefore interested in 
responses to the questions outlined below. The deadline for submission 
of comments is March 9, 2015. The Bureau encourages comments from the 
public, including:
     Student and parent consumers;
     Student associations and consumer organizations;
     Institutions of higher education and affiliated parties;
     Providers of financial aid disbursement services;
     Financial institutions; and
     Other interested parties.
    Please note that the Bureau is not soliciting individual student 
account information in response to this notice and request for 
information, nor is the Bureau seeking personally identifiable 
information (PII) regarding student accounts from the parties or any 
third party.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

Background

    Colleges and universities have long played a role in the offering 
of financial products to students. Institutions of higher education 
have partnered with banks and nonbanks to offer a variety of financial 
products and services, including loans under the now-discontinued 
Federal Family Educational Loan (FFEL) Program, private student loans, 
credit cards, student checking accounts, and closed-loop stored value 
card services tied to student ID cards.
    In February 2013, the Bureau published a Notice and Request for 
Information on Financial Products Marketed to Students Enrolled in 
Institutions of Higher Education.\1\ In September 2013, the Bureau 
hosted the Banking on Campus forum, seeking comment on the market from 
institutions of higher education, nonbank financial companies, 
technology providers, depository institutions, students, and consumer 
advocates.\2\
    The Bureau found that financial product marketing partnerships have 
shifted from credit cards and preferred student lender agreements 
toward student debit and prepaid cards. There are now more agreements 
to market student checking, debit, and prepaid

[[Page 4256]]

cards than agreements to market credit cards.\3\
    According to the Government Accountability Office (GAO), at least 
852 schools had agreements to provide debit or prepaid card services to 
their students as of July 2013. Enrollment at these schools accounts 
for about 40 percent of all postsecondary students.\4\

Arrangements Between Institutions of Higher Education and Financial 
Institutions

    Institutions of higher education have developed commercial 
arrangements with financial institutions to market a range of products 
to students. For example, some of these arrangements are limited to 
leasing university-owned property while others may be a sponsorship 
agreement or affiliated with the institution of higher education's 
athletics program. In many cases, these arrangements provide financial 
institutions unique or special marketing access to students.\5\
    Deposit Accounts Linked to Student ID Cards. Some institutions of 
higher education automatically link bank accounts to their student ID 
cards, while others allow their students to choose whether or not to 
opt in to linking their accounts. In 2012, the National Association of 
College and University Business Officers (NACUBO) found that 12 percent 
of schools surveyed had linked student ID cards to deposit accounts.\6\ 
According to the GAO, the ability to link an account might impact a 
student's choice in adopting a financial product.\7\
    Marketing Access on University Property. Some financial 
institutions include exclusive marketing, naming rights, and other 
agreements in their contracts with schools. In addition to co-branding 
on student ID cards, financial institutions sometimes give exclusive 
rights to brand events and place signage on university property. 
According to a report published by a consumer organization submitted as 
a public comment to the Bureau, many students often think of co-
branding as an endorsement.\8\
    Pay-for-Performance Bonuses. Many institutions of higher education 
receive indirect or direct compensation from financial institutions in 
connection with the offering of financial products. Some financial 
institutions offer direct payments for use of college trademarks and 
branding, others offer bonuses based on the number of student account 
sign-ups, while others offer discounted--or even completely free--
services in exchange for marketing access.
    Financial Aid Disbursement Accounts. Many students receive 
scholarships, grants, and student loans that cover more than the amount 
of their tuition, including costs like textbooks and transportation. 
Many institutions of higher education partner with third-party 
financial companies to disburse these funds directly to students. These 
companies may even seek to promote a specific financial product where 
financial aid proceeds could be credited. In 2012 and 2014, federal 
agencies issued consent orders that involved one of the largest market 
participants in the financial aid disbursement market for alleged 
violations of various Federal consumer financial laws.\9\

Additional Challenges and Risks

    While partnerships between financial institutions and universities 
have the potential to provide benefits to students, there have also 
been challenges.
    In 2007, the New York Attorney General reported questionable 
conduct by school officials, including university personnel who were 
accepting compensation and gifts from lenders included on school 
preferred lender lists and officials who owned stock in companies 
offering loans to students.\10\ The Higher Education Opportunity Act of 
2008 \11\ addressed many of these practices by requiring schools to 
clearly disclose the method and criteria used to choose lenders 
appearing on a ``preferred lender list'' and to develop a code of 
conduct. The Act also generally restricted co-branding, such as the use 
of a university logo or mascot.\12\
    Many colleges and universities have also formed credit card 
marketing agreements with financial institutions, which in some cases 
have resulted in targeted marketing and incentive payments to the 
school. The Credit CARD Act of 2009 \13\ restricted the use of tangible 
inducements (``freebies'') for students when marketing a credit card on 
campus, and required credit card issuers who enter into ``college card 
affinity agreements'' to submit agreements \14\ to a public database 
now administered by the CFPB.\15\
    The CFPB has called on financial institutions to voluntarily 
disclose agreements with institutions of higher education to market 
products to students.\16\ Information about these arrangements is 
already required to be disclosed when marketing credit cards and 
private student loans to students. The CARD Act requirement is limited 
to credit cards and does not include other financial products, 
including prepaid cards and deposit accounts with debit cards, marketed 
through schools. The CFPB has previously noted that making these 
agreements available for all financial products can demonstrate a 
commitment to transparency by financial institutions and their partner 
schools, helping students and their families understand basic 
information about these arrangements before choosing a specific 
product.\17\
    The GAO also noted that ``increased transparency for college card 
agreements could help ensure that the terms are fair and reasonable for 
students and the agreements are free from conflicts of interest.'' \18\ 
Additionally, NACUBO has urged institutions to publicly disclose the 
terms of these agreements as they relate to debit card arrangements 
used to access student loan and scholarship proceeds.\19\
    According to a NACUBO survey of school officials, 69 percent of 
debit card arrangements are already available to the public.\20\ 
However, finding these agreements can be difficult. For example, a 
student may need to file a formal request under a state open records 
law to obtain the information. Easier access to these arrangements may 
increase the public's confidence that these agreements are structured 
in ways that consider the interests of students.

Mechanisms for Developing Partnerships

    Institutions of higher education use a variety of mechanisms to 
develop partnerships with financial institutions. Many colleges solicit 
marketing partners by publishing a Request for Proposal (RFP) as part 
of a formal process to seek information from financial institutions. 
According to a NACUBO survey, 60 percent of schools use a competitive 
bidding process for establishing their relationships with vendors.\21\
    The Bureau's scan of publicly available RFPs showed that RFPs from 
institutions of higher education generally solicit proposals on a wide 
range of banking services and student banking affinity arrangements are 
usually only one component of those services. It appears that when 
evaluating these arrangements, scores generally do not heavily weigh 
student account features. Evaluation criteria rarely included a 
consideration of product features and costs. Some of the RFPs included 
a scoring system, where financial compensation to the school was 
heavily weighted.
    In light of recent concerns about the quality of banking products 
being offered to students through official partnerships, institutions 
of higher education have sought advice from the Bureau about how to 
ensure that

[[Page 4257]]

product offerings marketed to their students are superior to those that 
are generally available.

Safe Student Account Scorecard

    The Bureau is seeking public input on material that institutions of 
higher education can choose to include in their RFPs when soliciting 
marketing partnerships with financial institutions. The scorecard, once 
finalized, can help committees evaluating contract proposals to 
determine whether product offerings have safe features and offer 
superior value to students, as well as whether financial institutions 
are able to adhere to certain guidelines for transparency and for 
marketing practices. The goal of the Safe Student Account Scorecard 
will be to provide responsible institutions of higher education with a 
standardized format to solicit critical cost and feature information 
from prospective financial institution partners. Schools would be able 
to incorporate any or all aspects of the scorecard to meet their unique 
needs.
    For the purposes of soliciting detailed comments from the public on 
a scorecard, the Bureau drafted a sample version based on the FDIC's 
Model Safe Accounts Template.\22\ A sample Safe Student Account 
Scorecard is available at https://www.consumerfinance.gov/students/request-for-information-regarding-an-initiative-on-safe-student-banking/.
    The FDIC's template describes ``electronic, card-based accounts 
that limit acquisition and maintenance costs. Transaction accounts are 
checkless, allowing withdrawals only through automated teller machines, 
point-of-sale-terminals, automated clearinghouse pre-authorizations, 
and other automated means.'' The Bureau recognizes that the FDIC's 
template was not developed specifically for accounts to be utilized by 
students enrolled in institutions of higher education. In addition, the 
template may need to be adapted if institutions of higher education 
choose to enter marketing partnerships to offer other types of 
accounts.
    In developing the draft for comment, the Bureau also considered 
public comments and testimony received as part of its 2013 Request for 
Information,\23\ as well as public proceedings related to the 
negotiated rulemaking held by the U.S. Department of Education.\24\
    Below are some general areas for which information is being sought. 
Please respond to any or all of the questions below:
    1. How can institutions of higher education and students benefit 
from soliciting information on the features and cost of financial 
products marketed through a partnership with a financial institution?
    2. How can the draft scorecard based on the FDIC Model Safe 
Accounts template be adapted to meet the needs of this specific market 
and to other types of products that institutions of higher education 
seek to offer to their students?
    3. What are the potential advantages and disadvantages of 
separately negotiating arrangements with prospective financial 
institutions to market financial products to students, compared to 
including these arrangements as part of a broader relationship with a 
financial institution encompassing other services?
    4. What factors would institutions of higher education consider 
when determining whether or not to include additional information on 
product features and cost as part of a Request for Proposal?
    5. What other information would be useful for institutions of 
higher education to solicit from potential marketing partners to assist 
them in determining whether financial product offerings are safe and 
affordable for their students?
    6. What tools or information would be helpful for institutions of 
higher education when comparing proposals from potential marketing 
partners and selecting the proposal offering the safest, most 
affordable products for students?
    7. For existing arrangements between institutions of higher 
education and financial institutions to market student checking 
accounts, prepaid cards, and other financial products, what fees do 
students most frequently incur? To what degree do transaction patterns 
and fees vary among different student populations? How does this 
compare to the frequency of fee assessments on accounts unrelated to 
these marketing arrangements?
    8. For which student financial products would a Safe Student 
Account Scorecard be most useful to institutions of higher education?

    \1\ Consumer Financial Protection Bureau, Request for 
Information Regarding Financial Products to Students Enrolled in 
Institutions of Higher Education, available at https://www.regulations.gov/#!docketDetail;D=CFPB-2013-0003 (Feb. 2013).
    \2\ Consumer Financial Protection Bureau, Banking on Campus 
Forum, available at https://files.consumerfinance.gov/f/201309_cfpb_banking-on-campus-forum.pdf (Sept. 2013).
    \3\ Consumer Financial Protection Bureau, College Credit Card 
Agreements: Annual Report to Congress, available at https://files.consumerfinance.gov/f/201412_cfpb_college-card-agreement-report-2014.pdf (Dec. 2014).
    \4\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT 
CARDS: Actions needed to Address ATM Access, Student Choice, and 
Transparency, available at https://www.gao.gov/assets/670/660919.pdf 
(Feb. 2014).
    \5\ Consumer Financial Protection Bureau, What sunshine for 
student financial products can show us, available at https://www.consumerfinance.gov/blog/what-sunshine-for-student-financial-products-can-show-us/ (Feb. 2014).
    \6\ National Association of College and University Business 
Officers (NACUBO), Students Refunds and Personal Banking at Colleges 
and Universities, available at https://www.nacubo.org/Documents/Initiatives/Campus_Card_Survey_Summary_FINAL.pdf (Oct. 2012).
    \7\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT 
CARDS: Actions needed to Address ATM Access, Student Choice, and 
Transparency, available at https://www.gao.gov/assets/670/660919.pdf 
(Feb. 2014).
    \8\ U.S. PIRG, The Campus Debit Card Trap: Are Bank Partnerships 
Fair to Students?, available at https://www.uspirg.org/sites/pirg/files/reports/thecampusdebitcardtrap_may2012_uspef.pdf (May 2012).
    \9\ Board of Governors of the Federal Reserve System, Federal 
Reserve Board announces civil money penalty and issues cease and 
desist order against Cole Taylor Bank, available at https://www.federalreserve.gov/newsevents/press/enforcement/20140701b.htm 
(July 2014).
    Federal Deposit Insurance Corporation, FDIC Announces 
Settlements With Higher One, Inc., New Haven, Connecticut, and the 
Bancorp Bank, Wilmington, Delaware for Unfair and Deceptive 
Practices, available at https://www.fdic.gov/news/news/press/2012/pr12092.html (Aug. 2012).
    \10\ See for example, New York State Office of the Attorney 
General, Press Release, Attorney General Cuomo Announces Settlement 
with Education Finance Partners Over its Student Loan Practices, 
available at https://www.ag.ny.gov/press-release/attorney-general-cuomo-announces-settlement-education-finance-partners-over-its (Apr. 
2007).
    \11\ Public Law 110-315.
    \12\ 20 U.S.C. 1019a.
    \13\ Public Law 111-24.
    \14\ 15 U.S.C. 1637(r).
    \15\ Consumer Financial Protection Bureau, College Credit Card 
Agreements Database, available at https://www.consumerfinance.gov/credit-cards/college-agreements/.
    \16\ Consumer Financial Protection Bureau, CFPB Calls on 
Financial Institutions to Publicly Disclose Campus Financial 
Agreements, available at https://www.consumerfinance.gov/newsroom/cfpb-calls-on-financial-institutions-to-publicly-disclose-campus-financial-agreements/ (Dec. 2013).
    \17\ Consumer Financial Protection Bureau, What sunshine for 
student financial products can show us, available at https://www.consumerfinance.gov/blog/what-sunshine-for-student-financial-products-can-show-us/ (Feb. 2013).

[[Page 4258]]

    \18\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT 
CARDS: Actions needed to Address ATM Access, Student Choice, and 
Transparency, available at https://www.gao.gov/assets/670/660919.pdf 
(Feb. 2014).
    \19\ National Association of College and University Business 
Officers (NACUBO), Students Refunds and Personal Banking at Colleges 
and Universities, available at https://www.nacubo.org/Documents/
Initiatives/Campus_Card_Survey_Summary_FINAL.Pdf (Oct. 2012).
    \20\ Ibid.
    \21\ Ibid.
    \22\ In January 2011, the FDIC published a Model Safe Accounts 
Template. The Bureau reviewed this template and the associated 
docket of public comments when developing this draft Safe Student 
Account Scorecard for use by colleges and universities. Available at 
https://www.fdic.gov/consumers/template/background/.
    \23\ Consumer Financial Protection Bureau, Request for 
Information Regarding Financial Products Marketed to Students 
Enrolled in institutions of Higher Education, available at https://www.regulations.gov/#!docketDetail;D=CFPB-2013-0003 (Feb 2013).
    \24\ Department of Education, Negotiated Rulemaking 2013-2014 
Program Integrity and Improvement, available at https://www.2.ed.gov/policy/highered/reg/hearulemaking/2012/programintegrity.html.

    Dated: January 15, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-01492 Filed 1-26-15; 8:45 am]
BILLING CODE 4810-AM-P